Banks Urge U.S. Judge to Throw Out Libor Lawsuits

Banks facing a barrage of
lawsuits from customers accusing them of interest-rate rigging
argued on Tuesday that the cases should be dismissed, saying
there is no evidence of antitrust or other violations.

Banks facing a barrage of
lawsuits from customers accusing them of interest-rate rigging
argued on Tuesday that the cases should be dismissed, saying
there is no evidence of antitrust or other violations.

Plaintiffs including community banks and local governments
have sued Bank of America, JPMorgan Chase & Co
and others for allegedly manipulating the London Interbank
Offered Rate, commonly known as Libor.

Libor, which has been the focus of a global investigation by
regulators, is used to set interest rates on more than $350
trillion of securities from mortgages to complex derivatives.

At a hearing before U.S. District Judge Naomi Reice Buchwald
in Manhattan, lawyers for the banks urged that the cases be
thrown out before trial. The cases include proposed class action
lawsuits alleging violations of antitrust law and the
Commodities Exchange Act, which regulates the trading of
commodity futures in the United States.

The antitrust claims should be dismissed because there is no
documented agreement among the banks to keep Libor low, argued
Robert Wise, a lawyer for Bank of America.

Further, he told the judge, the banks did not restrain trade
because Libor is an estimate they provide on their borrowing
costs, not a price for a product they set in a competitive
process.

"Libor is not something that is bought, or sold, or traded,"
said Wise, who also argued that the plaintiffs lacked standing
to bring the lawsuits. "It is simply a benchmark, an average."

Judge Buchwald questioned the plaintiffs' attorneys on that
argument, noting that even if banks suppressed Libor they still
competed against each other for business once the rates were
set.

Bill Carmody, a lawyer representing the city of Baltimore
and other plaintiffs, argued that Libor is an essential
component of the price some customers paid for interest-rate
swaps and other financial products tied to Libor.

Carmody said that banks don't compete against each other
when they submit their Libor rates to the British Bankers'
Association each business day, though he later clarified his
statement to say that banks compete over products tied to the
interest rate that they set.

Wise attacked this argument, saying that the "Plaintiffs are
confusing a claim of being deceived ... with a claim for harm to
competition."

In the lawsuits, plaintiffs contend that the banks reported
artificially low Libor rates starting in August 2007 to play
down their borrowing costs and conceal their wavering health
while boosting their own returns on trades.

The lawsuits seek potentially billions in damages. The
plaintiffs argue they were robbed of more lucrative payouts on
financial products tied to Libor because of rate rigging.

Citigroup Inc, HSBC Holdings Plc, Deutsche
Bank AG and UBS AG are also among the banks
named as defendants in the various lawsuits.

Three banks have reached settlements with authorities to
resolve liability.

Most recently, Royal Bank of Scotland Group Plc
agreed to pay $612 million to U.S. and British authorities. Last
year, UBS agreed to pay $1.5 billion in penalties and Barclays
Plc agreed to pay $453 million. The scandal led to the
resignation of Barclays' chairman, chief executive and
chief operating officer.

The cases are consolidated under In Re: Libor-Based
Financial Instruments Antitrust Litigation, U.S. District Court
for the Southern District of New York, No. 11-md-2262.